Can Stock Market Development Boost Economic Growth and Trade Openness? Cointegration, Granger Causality and Forecast Error Variance Decomposition Tests for ARF Countries

Many studies investigate relationships between economic growth in specific economies and the depth in the stock market, or between its growth rate and its trade openness (exports plus imports). Advancing on earlier work, this paper uses panel cointegration and causality tests applied to ASEAN Region...

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Bibliographic Details
Published in:Prajnān (Pune) 2015-04, Vol.44 (1), p.9-28
Main Authors: Pradhan, Rudra P, Zaki, Danish B, Chatterjee, Debaleena, Maradona, Ranapratap, Dash, Saurav
Format: Article
Language:English
Subjects:
Causality
Development economics
Economic development
Economic growth
Economic models
Economic policy
Hypotheses
International trade
Investments
Liberalization
Securities markets
Stock exchanges
Theory
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Summary:Many studies investigate relationships between economic growth in specific economies and the depth in the stock market, or between its growth rate and its trade openness (exports plus imports). Advancing on earlier work, this paper uses panel cointegration and causality tests applied to ASEAN Regional Forum (ARF) countries over the period 19602012. The countries included in this analysis are Brunei, Burma, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand, Vietnam, Australia, Canada, China, India, Japan, New Zealand, Korean Republic, Russian Federation, the United States, Papua New Guinea, Mongolia, Pakistan, East Timor, Bangladesh, and Sri Lanka. Our novel panel-data estimation procedure offers more robust estimates by utilizing variations between countries as well as variation over time. We identify important long-run causal links among the variables and show their implications for economic policy.
ISSN:0970-8448